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About the TOKAI GroupWe anticipate the needs of daily life andprovide people with security and safety,
convenience and comfort, and joyful andmeaningful lives.

TOKAI Holdings Corporation(Code: 3167)
Please visit our updated website:
www.tokaigroup.co.jp/

(1) Introduction of the TOKAI Group1

Overview of TOKAI Holdings—Established in 1950. Decision to change to a holding company structure in 60th year, transition to new
structure the following year. Currently in 6th year——Merger between TOKAI CORPORATION (First Section), a provider of LP gas,
and VIC TOKAI(JASDAQ), a communications and CATV subsidiary—Company nameTOKAI Holdings Corporation
President and CEO

Katsuhiko Tokita

Stock market listingFirst Section, Tokyo Stock Exchange (code no. 3167)

Listing date

April 1, 2011

Group companies

22 consolidated subsidiaries, 4 affiliates

Sales, operating profit¥180.9 billion, ¥8.2 billion (FY03/16)

Employees

3,856

Main businesses
Note: Percentage figures indicate
proportion of total sales

Changes in management
structure

Gas and Petroleum

:

44.6%

(sales: ¥80.7 bn; operating profit: ¥9.0 bn)

TOKAI, TOKAI GASInformation andCommunications

:

24.4%

(sales: ¥44.2 bn; operating profit: ¥2.3 bn)

TOKAI COM

CATV

:

13.6%

(sales: ¥24.6 bn; operating profit: ¥2.0 bn)

TCN

Building and Real Estate

:

11.6%

(sales: ¥21.0 bn; operating profit: ¥1.3 bn)

TOKAI

Aqua

:

3.0%

(sales: ¥5.5 bn; operating profit: —¥1.1 bn)

TOKAI

Other

:

2.7%

(sales: ¥4.9 bn; operating profit: —¥5.2 bn)

1950 Established as Yaizu Gas Co., Ltd.
1987 Listed on First Section of Tokyo Stock Exchange, name changed to TOKAI CORPORATION
2011 TOKAI Holdings Corporation established2

Striving to Meet the Needs of Society and Customers—Started in the gas business, then expanded infrastructure services to respond to social issues anddemographic changes——Offering services that provide people security and safety,
convenience and comfort, and joyful and meaningful lives—
1950s

1960s

1970s

Post-war expansion in housing
volume (through 1970)1980s
Property crime peaks(1985)

1990s

Convergence of broadcasting
and telecommunications (2005)

Windows95
release(1995)

Second generation baby
boom (1971–1974)

2000s

2010s
Elderly ratio reaches 1 in 4
(2014)

Revision to the NTT Law(2001)

Electricity

1973
Aqua

2007

Security

1984

1970
City gas

1950

WWW

WWW

Cable TV

Internet

ADSL/FTTH

Mobile

1988

1996

2001

2006

CATV

Bridal1959

1972

Developed LP gas distribution
system using large-scalecomputers, providing theopportunity to promote Information
and Communications business

SIer
Systemdevelopment

Data center

1983

1985

Telecoms
network

2001

2011

2016
Transition to a holing company structure

HousingNursingcareElectric power
liberalization (2016)

Toward the realization of TLC (Total Life Concierge)

Insurance

LP gasPresent3

Our Fundamental Strength: (1) Customer Base
－2.56 million customers use our products and services nationwide——Strong connections with customers in Shizuoka Prefecture and the Kanto region,plus increasing customer count due to expansion into new areas——Steady progress in increasing number of members as part ofinitiatives to secure earnings over a customer’s lifetime and promote cross-selling－

Customers(Thousands)

Aqua

3,000

2,500

71

2.56mnGas (LP, city gas)

13
CATV

Point Club Memberships to Exceed 500 thousand

Other

32

63

Shizuoka Points accrue based onmonthly usage amounts. Usersof multiple services receive
additional bonus points.

in FY03/16

Breakdown of

Breakdown of

2.56mn customers

2.56mn customers115
as of Mar. 31, 2016as of Mar. 31, 2016108

 Can be used as e-money at
170 thousand affiliated shops,
with links to other point
services.

109
2,000

Communications (Hikari
Collaboration + conventional
ISP + mobile)

Kanto

1,500

1,000

740
thousand

700

Memberships

600

in FY03/01

500

491

500

Mar. 31,2016

Apr. 30,
2016

306

400
500

 Successful in reducing
cancellation rate by half.

(Thousands)

200
thousandin FY03/90

600

366

300
200
100

92

0
‐

Mar. 31,2013

Mar. 31,2014

Mar. 31,2015

Mar. 31,2017

4

Our Fundamental Strength: (2) Comprehensive Services—TLC (Total Life Concierge) is the core concept of our service provision—－We offer customers convenience and economic benefits by combining multiple services in line with our strategy toincrease ARPU－—We offer competitive prices compared with other companies in our industries.
Our strength is the ability to provide services as a set—

Using Other Companies’
Services

Using Our Services

Separate contracts

One-stop provision of reliable services

Company A

WWW

ADSL/FTTH

Contract,
payments,
inquiries

Company C

MobileContract,
payments,
inquiries

Customers

Company B

One contract
Contract,
inquiries,
payments＋
Point benefits*

One Call center

LP gasContract,
payments,
inquiries

City gas

LP gas

Housing

Aqua

WWW

CATV

Nursing
care

Cable TVADSL/FTTH

BridalSecurity

MobileInsurance

Electricity

Provide additional benefits
by offering multiple
services in a set menu
contract (discounts anddouble TLC points*)* Points not available for mobile and insurance5

Our Fundamental Strength : (3) Agility－A total of 1,500 managers meet customers face-to-face and propose solutions——Call centers help reduce cancellations
and will proactively expand operations to support contract acquisitions—127

sales locations** Including three overseas locations (Shanghai, China;
Taipei, Taiwan; Yangon, Myanmar)

40 million

Yangon, Myanmar
Shanghai, China

customer contact points

Taipei, Taiwan

1,500

Headquarters
Branch sales offices

regional managers

Call centerAround400

operators atnine locations throughout Japan6

Successful TLC Model Leveraging Regional Ties
－Our core strategy is to promote multiple service contracts through sales based on regional ties——The gas business is the basis for TLC because customer contact points
are strong, providing a high rate of multiple service contracts—

Two in three households in
Shizuoka Prefecture are ourcustomers(TOKAI Group household contracts)

920

thousand(Households in Shizuoka Prefecture)

1.43 million

Of these, 15.8% use two
or more services (nationwide,
6.7%)
ShizuokaPrefecture

Kanto area

15.8%

1.0%

Of this figure, gas customers are especiallyeffective targets for cross-selling the Group’s
other services

City gas

LP gas

36.8%

23.1%

1 Contracts by the TOKAI Group as of March 31, 2016 (Gas: 230 thousand; CATV: 390 thousand; Information and Communications: 470 thousand, Aqua: 70 thousand)
2 The number of households in Shizuoka Prefecture is as of April 1, 2016, according to “Shizuoka Prefecture Population Statistics, by City, Ward, Town, and Village,”
Shizuoka Prefectural Government. Calculations for monthly reporting of population statistics in Shizuoka Prefecture are based on preliminary national census figures(population as of October 1, 2016).

7

Our TLC Vision and Expansion Scenario—Conduct a full-fledged rollout into other areas, under the TLC strategy of providing each customer
household with multiple products and services—－We intend to accelerate the expansion of new products and services by developing new businesses
ourselves and through alliances with other companies—

Area expansion anddominance through TLC

Also looking at new businesses andservices in the private/public project sector

Education

City gas
Medical care
Tourism

LP gasNursing care

Electricity

Aqua

JoyfulMeaningful

SportsSecurity
SafetyBridalEnvironment
Security

Convenience
ComfortInsurance

Agriculture
Housing

WWW

CATV

MobileCable TVADSL/FTTH

CLOUD
CLOUD

AI

AI

Expanding worldwide

IoT-related

AI-related

Inner circle: Existing service
Outer circle: New Service※Presented in a “growth strategy for the nominal GDP600 trillion yen” announced on April 19, 2016 at the 26th industrial competitiveness conference8Overview of the Next Medium-Term Management Plan
—FY3/17: Formulate a new medium-term management plan for FY03/18–FY03/21——Shift towards a growth strategy based on the core fitness strengthened in the six years from FY03/12 to
FY03/17—〇 Shift towards
growth strategy 〇FY03/21

Add on lifestyle services to a solid
customer base of 2.56 million
Further expand our customer base byenlarging our service area*
Enter and expand growth areas byentering national strategic growth areas*

Return to a period of growth↓•

Grow our customer base by 1.6x to over4.0 million•

Increase the ratio of multiple service
contracts to over 50%* Actively seek M&A and other opportunities•

More than double sales and profits

FY03/17
Strengthen core fitness↓• Continue to make steady progress inrecovering profitability of core businesses(communications, Aqua, gas)
• Improve the equity ratio into the 30% range•••[Organic growth]

 Sales¥187.1bn
 Operating profit ¥12.6bn
 ROE
13.7%
 Employees
4,000 Customers
2.6mn Overlap ratio
7.0% TLC members 0.6mn

Sales +¥23.8bn/Operating profit +¥4.4bn[Cross-selling]
Increase of 1.25mn customers
Sales +¥60.0bn/Operating profit +¥3.0bn[New products]
Sales +¥30.0bn/Operating profit + ¥1.5bn[M&A] Sales¥400.0bn
 Operating profit ¥26.5bn
 ROE
12–15%
 Employees
6,700 Customers
4.1mn Overlap ratio
50–100% TLC members 1.35mn

Sales +¥100.0bn/Operating profit +¥5.0bn

9(2) Progress on “Enhancing Profitability”
Earnings Highlights for FY03/16(Fiscal Year Ended March 31, 2016)

and Performance Forecast for FY03/17(Fiscal Year Ending March 31, 2017)10

Innovation Plan 2016 “Growing”—Under IP16 “Growing,” prioritize enhancing profitability in core businesses, an issue seen with IP13——By the end of the plan’s final year, boost operating profit to ¥12.6 billion
and the equity ratio to 30% (plan calls for 28.6%)—(Equity ratio)(Operating profit：¥bn)

14
12

10.8

10.9

10

12.6
8.9

7.4

8

8.2

6
4
2
0

14.3%

18.6%

9.7

21.6%

23.0%

25.1%

FY03/14
ActualFY03/15Plan

FY03/16
Plan

28.6%

7.7%
FY03/11
ActualFY03/12ActualFY03/13
ActualHolding company
structure

Innovation Plan 2013
“Reinforcing themanagement structure”
Restructure business
Improve finances
Expand the customer base

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

FY03/17Plan

Innovation Plan 2016
“Growing”“Enhancing profitability”
Reinforce profitability of main businesses
Respond to liberalization
Further strengthen finances11

FY03/16 Performance Highlights
1. “Real” sales increase Price decline due to fall in LP gas contract prices (FY03/15:$699➡FY03/16:$396) had ¥10.3 billion
impact➡･ Basically neutral impact on gross profit (although improved margins on household and industrial use
boosted profit) Improvements in all segments except Gas and Petroleum, boosting sales by ¥3.7 billion

2. Strategic expenditures of ¥3.0 billion, otherwise profits up
 Customer shift to Hikari Collaboration (transfer rate of 27.8%) outpaced the national average (20.6%),
progressed to 219 thousand➡･ Aggressively promoted shift to high-profit services ➡･ Major profit growth factor in FY03/17

 Improved profits in all segments except Information and Communications led to higher profits➡･ Gas and Petroleum segment+¥1.3 billion (including improved margin due to lower contract prices)➡･ CATV segment+¥0.3 billion➡･ Aqua segment+¥0.2 billion➡･ Building and Real Estate segment +¥0.2 billion

3. Achieved “provision of 100% of profits to shareholders”
 In line with financial improvement, introduced YoY dividend increase and share buyback in FY03/16➡･ Also raised year-end dividend to reflect higher-than-expected profits

 Considering same stance regarding returns in FY03/17

12

Lower Sales on Price Fall Linked to Contract Prices (CP) in LP Gas
Business—Raw materials price down approximately 40% YoY, impact of approximately¥28/kg x selling price of over 300 thousand tons/year led to sales impact of minus ¥10.3 billion——For household use, margins on difference between selling and procurement prices improved ¥2.1 billion
from two years earlier, increasing profitability—
LP gas CP
1,200($/ton)
1,000

1,100

CP

$867
$699

800

600

400

200

0

500

Monthly CP value
Average CP for fiscal year

FY03/14

FY03/15

Avg.
exchange rate

CP x exchange rate

FY03/14$867/ton¥99.56/$¥86,318/ton

FY03/15$699/ton¥108.42/$¥75,785/ton(-12.2% YoY)

FY03/16$396/ton¥120.75 /$¥47,817/ton(-36.9% YoY)

FY03/17(forecast)$370/ton¥119.42/$¥44,185/ton(-7.6% YoY)

(Forecast)

$396
315

FY03/16$370
285

FY03/17

13

Generally in Line with Expectations on the Earnings and Financial Fronts—All profit items outperformed forecast, improvement in interest-bearing debt,
real improvement in equity ratio——Net customer increase at 20 thousand from prioritizing profitability,
and major increase in Hikari Collaboration contract acquisitions, at 219 thousand—

FY03/15

FY03/16

YoY change

Forecast
Announced in
May 2015¥187.5bn¥180.9bn-¥6.6bn¥192.2bn

Operating profit¥9.0bn¥8.2bn-¥0.8bn¥7.8bnRecurring profit¥8.5bn¥8.2bn-¥0.4bn¥7.4bnNet income¥3.9bn¥3.5bn-¥0.5bn¥3.2bnIncome per share¥34.16¥30.01-¥4.15¥28.04

Dividend per share

¥12

¥14

+¥2

¥12

¥73.1bn¥71.4bn-¥1.7bn¥72.5bn

25.6%

-0.1%

26.1%

2,558k+20k2,611kSales

Interest-bearing debt
Equity ratio

25.7%

Customers

2,537k** Excluding impact of devaluation of investment securities, 26.3% above forecast figure

14

Net Customer Increase by Prioritizing Profitability—Promoting customer acquisition by prioritizing profitability during IP2016 “Growing” period,
FY03/16 achieved YoY increase of 20 thousand customers——In communications, proactive shift in investment from conventional ISP to highly profitable Hikari
Collaboration——In Aqua, revising sales method in response to slower market growth an issue this year—

Mar. 31, 2014 Mar. 31, 2015 Mar. 31, 2016

Information andCommunications

Gas (LP, city gas)
Conventional
ISP, etc.
HikariCollaboration

MobileSubtotal

CATV
Aqua
Security

Total

YoY

628k

626k

634k

+8k

854k

859k

633k

-227k

4k

219k

+215k

235k
1,099k
690k
130k
18k
2,537k236k1,088k
710k
133k
18k
2,558k

+1k
-11k
+20k
+3k
-0k
+20k

―

227k
1,082k
693k
122k
19k
2,519k15

Achieved Commitment to Provide 100% of Profits to Shareholders—During the year, announced return policy of ¥1.4 billion in dividends + share buyback of ¥1.8 billion(forecast net income of ¥3.2 billion)——Implemented share buyback (¥1.8 billion: 3 million shares) and decided to raise year-end dividend by ¥2/share on
higher-than-expected profits
Note: Of treasury stock held (39.19 million shares on Sep. 30, 2015: 25.3％), cancelled 15.2 million shares, or
10% of issued shares.

Income per Share (¥/share), Dividends (¥/share)
and Payout Ratio (%)

Net Income (¥bn) and Dividends (¥bn)
M/標準

80.0%

65.00

M/標準

3.9

M/標準

2.7

45.00

Share buyback

M/標準

2.6

M/標準

M/標準

M/標準

1.2

1.3

60.0%

55.00

3.5

3.1

M/標準

Total payout ratio
policy of 100%*

1.4

1.4

44.2%

1.8

40.2%

27.17

M/標準

20.0%

34.16

30.01

12

12

0.0%

Dividend
increase

22.67

25.00

15.00

40.0%

46.7%
35.1%

29.85

35.00

1.6

52.9%

‐20.0%

12

12

14‐40.0%‐60.0%

M/標準
5.00‐80.0%

M/標準

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16(5.00)Net income

Dividends■Share buyback* (Total dividends (excluding subsidiaries) + share buyback price) ÷ net income = 98.35%

FY03/12

FY03/13

Income per share

FY03/14

FY03/15

Dividend per share

FY03/16‐100.0%

Payout ratio

16Highlights of FY03/17 Performance Forecast
1. Forecast increased sales and profits (record highs in all profit categories)

Incorporating ¥4.9 billion reduction due to price decreases linked with falling contract prices, but neutral impact
on gross profit expected this year
¥8.7 billion increase in Hikari Collaboration, plus ¥2.4 billion rise from higher monthly fees in other businesses

2. Develop strategy prioritizing efficiency in Hikari Collaboration, profitability in Aqua

In communications, continue promoting shift from conventional ISP to highly profitable Hikari Collaboration➡･Acquisitions to fall YoY and achieve a “cruising pace,” earnings to improve considerably

In Aqua business, change sales method, adopt a strategy prioritizing profitability to secure profits➡･ Shift from previous focus on expanding the base to emphasis on profitability, dramatically improve expenditures

3. Expect to reach financial targets in final year of IP16 “Growing”
4. Plan major dividend increase, maintain policy emphasizing shareholder returns in
FY03/17


Forecast dividend increase from ¥14/share per year in FY03/16 to ¥22/share per year in FY03/17 (interim andyear-end dividends of ¥11/share each)➡･ Dividend policy targeting payout ratio of 40%

Consider same stance as in FY03/16 for other returns (such as share buybacks)

17Final Year of Current Medium-Term Plan (Enhance Profitability)—Expect to meet all profit targets under IP2016 “Growing” in FY03/17——On financial front, also expect to meet all indicator targets under IP2016 “Growing”——Expect to double net customer increase YoY andpromote shift of approximately 140 thousand customers to Hikari Collaboration—

FY03/16

FY03/17

YoY change

FY03/17 under
IP16 “Growing”¥180.9bn¥187.1bn+¥6.2bn¥209.5bn

Operating profit¥8.2bn¥12.6bn+¥4.3bn¥12.6bn

Recurring profit¥8.2bn¥11.8bn+¥3.7bn¥11.8bn

Net income¥3.5bn¥6.2bn+¥2.8bn¥6.2bnIncome per share¥30.01¥55.13+¥25.12¥54.06

Dividend per share

¥14

¥22

+¥8

¥12

¥71.4bn¥62.2bn-¥9.2bn¥64.7bn

25.6%

30.8%

+5.2%

28.6%

2,558k

2,604k+46k

2,730kSales

Interest-bearing debt
Equity ratio
Customers** Excluding impact of devaluation of investment securities, 26.3% above forecast figure

18Increase Customers with Ongoing Focus on Profitability—In LP gas, net customer count to double, including expansion into new areas——In communications, proactively shift to highly profitable Hikari Collaboration,achieve a “cruising pace” of Hikari Collaboration acquisitions this year——In Aqua, change sales strategy, with fewer customer acquisitions but a focus on profitability,
quickly moving into the black—Mar. 31, 2015 Mar. 31, 2016 Mar. 31, 2017

YoY

626k

634k

650k

+16k

859k

633k

499k

-133k

HikariCollaboration

4k

219k

357k

+138k

235k
1,099k
690k
130k
18k
2,537k236k1,088k
710k
133k
18k
2,558k237k1,094k
730k
138k
18k
2,604kInformation andCommunications

Gas (LP, city gas)
Conventional
ISP, etc.

MobileSubtotal

CATV
Aqua
Security

Total

+1k
+6k
+20k
+5k
+0k
+46k
19

Essentially All Factors in Place to Support Profit Increase This Year—In Hikari Collaboration, rise in number of contracts accumulated last year and this year——In Aqua, quickly move into the black due to changes in sales methods:
fewer acquisitions, and prioritizing profitability——In the LP gas business, invest in
marketing and expanding within the range of profit growth—(Operating
profit: ¥bn)
130
13

End of HD
goodwill
amortization

Increase in contracts
due to YoY increase in
FY03/16 and FY03/17
at a “cruising pace.”

CATV

Aqua

120
12
HikariCollaboration

110
11

+1.13

909
808

8.2

-0.5

Other

+0.26

12.6

+0.43

11.3

100
10

+2.28

+0.8

LP gas customer
increase, area
expansion

Change sales
strategy: reduce
customer acquisitions
and review incentives,
thoroughly focusing
on profitability.

11.3+¥0.7 billion from risein usage fees in linewith net customer
increases (+20
thousand in FY03/16,+20 thousand in
FY03/17). But costs+¥0.3 billion fromhigher acquisitioncommissions, etc.

11.3-¥0.2 billion due tomarketing costs (newbase and personnel
costs) to expand areain the Tohoku andthree prefectures in
Tokai regions. -¥0.3
billion due to higher
costs associated withincrease in customer
acquisitions.

707
606

FY03/16
ActualFY03/17
Forecast

20

The performance forecasts and forward-looking statements in these materials arecalculated according to currently available information, and include potential risks anduncertainties. Please be aware that due to changes in a variety of factors, actual results
may differ materially from the projections and other forward-looking statements in thesematerials.
Please contact us with any questions regarding these materials.
Public Relations and Investor Relations Office
TOKAI Holdings Corporation
2-6-8, Tokiwa-cho, Aoi-ku, Shizuoka 420-0034, Japan
Phone: +81- (0)54-669-7676
Fax: +81- (0)54-275-1110
http://tokaiholdings.co.jp/english/
E-mail: overseas_IR@tokaigroup.co.jp

21